Tag Archives: first home buyer

Struggling to buy a home in Australia? It can be frustrating, especially when you have to compete with investors snatching up houses for sale on every corner.

Housing values in the country have been on the up, driven mainly by prices of real estate in Sydney and Melbourne. This is partially thanks to the 2 per cent cash rate that has pushed interest rates on home loans to record lows.

To combat the risk of a market crash, the Australia Prudential Regulation Authority (APRA) has put countermeasures in place, including a ten per cent limit on investment credit yearly growth. While not technically enforced, this suggested target aims to restrict lending to investors to help cool rising prices.

So the big question is, is this solution working?

A look at the numbers will seem to suggest – yes.

Owner occupation on the rise

According to the Housing Industry Association (HIA), home loans for owner-occupier housing increased in August by 2.5 per cent. HIA Economist Diwa Hopkins also notes that “lending to investors seeking to construct housing fell away sharply during the month”. This means that more financing is being shifted away from investors and put toward owner-occupiers.

Furthermore the Australian Bureau of Statistics show that the dwelling commitment values for this type of property increased by 6.1 per cent (seasonally-adjusted estimate) from July to August. Meanwhile, it decreased by 0.4 per cent for investment housing.

As the APRA continues to crack down on banks exceeding the 10 per cent ‘speed limit’, you can expect to see the real estate market be less and less heated in the months to come. If you’re looking to buy a home you can settle in, it’s important to be ready to snatch up a property for sale that suits your needs.

When it comes to living in Australian property, purchasing with home loans seems to be the default choice. For many, there’s a general impression that renting property is some kind of short-term bridge between leaving your family and buying your first home.

But if you’ve had your eye on real estate news for the last few years, you’ll notice that purchasing real estate in Australia is getting increasingly difficult, particularly in certain capital cities.

While there are many great perks and benefits from owning property, there are also key advantages to renting that make it an appealing option.

Affordability

Affordability is a big factor for anyone. In this field, the case for renting seems to have the upper hand.

The Housing Industry Association reported in June that the National Affordability Index dropped by 2.9 per cent. Sydney and Melbourne saw the greatest decreases, at 6.9 and 9.1 per cent respectively. This demonstrates that housing prices are rising faster than people’s earnings.

While people with low interest home loans can still find ways to adapt and purchase property, it outlines just how comparatively affordable renting could be.

The deal with yields

The best way to observe this comparison is not just to examine rental rates, but to take a look at yields. Sure, rates can give you a snapshot into how much it’ll cost you per week, but this alone will not give you a holistic view.

Yield figures on the other hand, will show you how renting stacks up to buying property in the current market, which is the real contest here. This can be defined as the percentage of rental income to the home’s purchase price.

For instance, CoreLogic RP Data research notes that the median rental price for a Sydney house was $610 in July. This figure might seem high and have you consider buying instead.

However, figures reveal that Sydney’s rental yield was down 0.2 per cent over the quarter, and decreased by 0.6 per cent over the year to July. This shows that rental income were in fact lower than they should have been when considering property prices.

This is true for many of the other capital cities as well, and is a sign that renting could the far more affordable option in relativity to housing prices.

Stable rates

Another good reason to look at houses for rent is the fact that rates have been mostly stagnating. Australia’s combined capital cities experienced a 0.7 per cent decline in rates over the September quarter, with every single one recording negative change.

Melbourne has lead the charge in rental growth over the year, showing a 2.1 per cent rate increase in the year to September but clearly, this figure is hardly something to worry over.

With stable rates that are lower than property prices would have them, anyone who may struggle with mortgage repayments should consider renting instead.

When you set out as a first home buyer, there are many steps along the way to getting on the all-important bottom rung of the property ladder. One such step is pre-approval for a loan, which can be vital depending on how you are buying a property. Here are some of the benefits of getting a loan pre-approved.

It saves you time

When you obtain pre-approval, you are not just getting a tick of approval from your chosen lender – you are getting an outline of how much you can spend. Once you work out the ballpark amount of what you can borrow, you gain a much clearer idea of what kind of property you can and cannot purchase.

This is much better than wasting time negotiating on a property you really want, only to discover that you are unable to secure lending to pay for it – find out in advance!

It helps your negotiations

Having a loan pre-approved shows a vendor that you mean business. You know how much you can spend, and the bank is willing to back you up, so home sellers may be more likely to engage with you at the negotiating table.

Knowing your lending limit can come in handy if you negotiate on your own, as it could stop you from getting carried away and committing to spending more than you can afford.

It lets you go to auction with confidence

Most auctions will require you to have pre-approval on a mortgage. This is because once the reserve is passed, bids will be binding – you do not want to find yourself unable to back up your auction actions when the hammer falls!

By going to your chosen lender and obtaining this important approval, you can swiftly and confidently get cracking on the real estate purchase of your dreams.

Getting on the property ladder is something that features high on many people’s wish lists, but unless you’ve got a deposit saved up, this could well continue to be a pipe dream.

Whether you’re buying on your own or as a couple, making sure your finances are in check is the best way to have the best possible chance of securing a home loan.

Don’t expect your deposit to build up overnight – here are some ideas for making those little lifestyle changes that can lead to a big difference for your finances.

Set a budget

Budgeting skills are important in everyday life and this is especially the case when it comes to building up a deposit for your home.

Once you’ve got an idea of how much you need to save up you can set to work on putting a budget together that’s going to be easy to stick to.

Make sure you account for all those little extra expenses, including the coffee you regularly enjoy on the way to work and those sneaky drinks after work – they all take their toll on your finances in the long run.

Pay down debts

One aspect of your finances that lenders will look at is how much existing debt you have, which is why it’s so important to pay them down before making a mortgage application.

Pay off those credit cards, loans and anything else they might be able to hold against you. It’ll make the process a whole lot easier!

Set up a separate savings account

There’s just one problem with using your normal account for saving for a deposit – you might be tempted to dip into it now and again!

Having a totally separate account will remove this temptation and, if you play your cards right, you might even be able to find one that offers a decent rate of interest.

If you’re looking to put your flatting days behind you, buying a home as a young couple is an exciting prospect.

However, there are several factors to keep in mind when you decide it’s time to buy. From coming up with a deposit to choosing the right area, the buying process can seem complicated at the best of times.

Fortunately, with some careful planning and a sense of reality about what you can afford, you’ll be in a much better position to make an offer on that perfect property.

Save, save, save

Whether you want to buy a home in six months or three years time, you’ll first need to come up with a significant deposit.

Depending on the city or town you choose to buy in and the kind of property you’re after, the deposit you need could vary greatly. For this reason, you’ll first need to research average house prices in your desired area so you know what figure you’re working towards.

Your loan to value ratio (LVR) is a figure that’s calculated by dividing the amount you’re borrowing by the value of the property you want to buy, notes the Australian Securities and Investment Commission. You’ll have to borrow whatever your deposit doesn’t cover.

You should aim for a low LVR – ideally less than 80 per cent. Otherwise, you’ll likely need Lenders’ Mortgage Insurance, which protects the lender if you default. This is an extra cost that will be added to your loan repayments, so work on coming up with a deposit of 20 per cent or more to avoid this.

Think ahead

If you’re planning on starting a family in the future, you should consider whether the home you’re buying now will accommodate a family in the future.

Consider the number of bedrooms and bathrooms as well as outdoor space. You’ll also need to investigate what schools are available in the area. Thinking ahead can eliminate the need to sell a home that you’ve come to love because it’s become unsuitable for your needs.

Buying your first home as a young or soon-to-be family is an exciting prospect, but how do you know what’s right for you?

Double or single storey?

A home that’s got smaller rooms but is spread across two storeys may prove to be a more desirable family home than a single-level property.

The top floor of double storey homes can be used as a space for children’s bedrooms and play areas, while living space is downstairs. This is ideal when you want to encourage young children to nod off, with the physical separation of a second level an ideal way to establish this.

By contrast, you might favour expansive open plan living, so a single level home could suit. In this case, it’s preferable to buy a property that has bedrooms and living space at opposite ends of the house.

Know your area’s amenities

There’s no point in buying a picture perfect family home if your children will end up having to travel long distances to early childcare, primary or high school.

Looking into the future at schooling options could save you heartache down the track. Buying a house with enough bedrooms and in an area close to quality schools means you’ll be less pressured into moving at a later date.

Run around space

It’s no secret that kids who have run around all day, whether at home or school, tend to settle better in the evening.

While it’s important to have ample interior space, an outdoor area for a spot of backyard cricket or children to run around in can be incredibly valuable.

A second bathroom

Think back to your flatting days – how annoying was it to have to share a single bathroom with four or five other people?

From singing in the shower to turning teeth brushing into a complicated exercise, kids aren’t always going to be timely.

Avoid the stress of trying to coordinate the family’s ablutions with a single bathroom and buy a property that has two bathrooms, or at least separates the toilet and shower.

Everybody is always on the lookout for a good deal. From weekly grocery shopping and car maintenance to buying clothes, this also extends to purchasing real estate. Negotiating the purchase price of a home is a normal part of every sale. It’s not unusual for there to be some difference of views when it comes to the value of a property. The process of negotiating the purchase of a home can seem difficult, especially to those who haven’t purchased a property before. However, the secret lies in the amount of research you do and the strategy you select.

Set your limit

Before you begin negotiating, you’ll need to establish your budget and your limit. These are two separate figures, as your budget is how much you’re able to spend, while your limit is how much you are willing to spend. Your limit will be there to stop you from overspending and will be your ‘walk-away’ price.

Get pre-approved

If you get your home loan pre-approved by a lender, it helps to show owners and agents you’re serious about purchasing a home. This can give you a leg-up over other buyers in the market, as you’ll have your finance ready to go and you won’t need special finance conditions in the contract of sale.

Identify your conditions early

Need a longer settlement? Does the owner need to fix the hot water service before you take possession of the house? If there are any special conditions for the purchase of the property, it’s best to bring these up with the owner and agent early in the negotiating process. Once these have been identified, you can include them in the formal offer and final contract of sale. Negotiating the sale of a home is not always a fast process. In fact, it may take days or weeks with a lot of back-and-forth between agent, owner and buyer. Be sure to put the research in and maintain a clear path of communication with the agent for a successful purchase.

For would-be home buyers hoping to capitalise on prime buying market conditions and get a jump start on the peak Spring season, here’s some helpful research tips to make sure they get the most house for their dollar.

houses that have been sold multiple times over a short period. This could signal a problem with the home or immediate location and new owners are looking to offload it soon after they take possession.

any easements that could affect what you would like to do with the property. Tears often result when a much desired and longed for pool, or extension is unable to be built because there is an easement in the way. Check the plans carefully or seek appropriate legal advice.

overhead wires or storm water drains and easements that could affect the value of the property and prove restrictive or prohibitive.

zoning and regulations. Homes that are in areas susceptible to ‘forces of nature’ such as floods, or fires, can add costs to a property, especially insurance, and may impact on any future plans.

geography of the property’s location. The high side of the street is often more valuable, there’s sometimes a better side of the highway/railway and proximity to transport. Check if it is under a flight path and remember that in some locations, flight paths vary to share noise at different times of day.

rat runs. Is the property located beside or on a road that is normally quiet, but becomes choked around peak hours with cars avoiding traffic snarls in other nearby locations? This may affect the property’s value or its livability.

Local amenities, services and facilities are also important to research. This includes things like the property’s proximity to schools and shops, or health and welfare centres and hospitals as well as recreational facilities such as gyms or parks and gardens.

There are plenty of readily available places for a home buyer to gather information. The web, the local council especially for planning, zoning and regulation matters and word of mouth. Talking to neighbours is a good place to start, but local real estate agents are the best, particularly First National agents whose promise is to put you first. They exert a great deal of time and effort in keeping their clients up to date in the most appropriate and convenient manner. Sometimes that is face to face, and sometimes it is through technology such as the web, Twitter, SMS, email and facebook.”